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With a lack of detail about how the apprenticeship levy will be implemented when the new rules were announced, there remains some uncertainty around the levy and what it may mean for smaller businesses.

Although the government has now provided additional details, many small businesses are still unsure about whether they will be levied with the new charge. For groups of smaller companies, in particular, this is a worthwhile reminder and update on where connected companies stand with the apprenticeship levy.

How will the apprenticeship levy work?

Starting 1 April 2017, the apprenticeship levy will be set at a rate of 0.5% of an employer’s paybill. Each employer will receive an allowance of £15,000 to offset against the levy, so only employers with a wage bill in excess of £3m will be affected.

All employers operating in the UK with a wage bill of over £3m will therefore need to pay the new 0.5% levy, regardless of whether or not apprentices are employed.

Because of this allowance, it is expected that nearly 98% of companies will not pay the new charge.

Small businesses could still be caught out

Based on the additional details the government has now published, there appear to be wider consequences for connected companies and groups than initially expected. The government has confirmed that: “where a group of employers are connected they will only be able to use one £15,000 allowance” to offset against the levy.

It was initially drafted that the allowance could not be split between connected companies, meaning that many SME groups would have had to pay the 0.5% levy. Some SME groups, however, may still be caught out by the levy….even those connected companies that have paybills below £3m when the group total paybill exceeds £3m.

You can find more on the apprenticeship levy in our detailed guide here.

More from our tax experts

You can find all of our latest tax articles and tax resources here.

If you are looking for advice in a particular area, please get in touch with your usual Hawsons contact.

Alternatively, we offer all new clients a free initial meeting to have a discussion about their own personal circumstances – find out more or book your free initial meeting here. We have offices in Sheffield, Doncaster and Northampton.

Scott Sanderson began his career with Hawsons and trained as a Chartered Accountant, becoming a partner in 2015, specialising in the healthcare sector and small businesses. For more details and advice, please contact Scott on [email protected] or 0114 266 7141.

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